Archive for April, 2016

Over 20 countries have joined the UK-led pilot to automatically share ownership information for companies. As such their tax and law enforcement agencies will now exchange data on company beneficial ownership registers and new registers of trusts enabling more effective investigation of financial wrongdoing and tax-dodging. [See free SSRN download of Lexisnexis® Guide to FATCA Compliance 2016]

As recent events have shown we need to take firm collective action on increasing beneficial ownership transparency, building on our actions to date. Criminals continue to find ways to exploit the cracks in the current system, setting up complex structures in various and often multiple locations to hide their activities, be it money laundering, tax evasion or illicit finance. As with tax evasion, this requires a global response.

On beneficial ownership, it is essential to apply enhanced standards of transparency at European and international level. In this spirit, we have committed to establishing as soon as possible registers or other mechanisms requiring that beneficial owners of companies, trusts, foundations, shell companies and other relevant entities and arrangements are identified and available for tax administration and law enforcement authorities. We call on all other Member States, countries and jurisdictions to do so.

We also commit to the new pilot initiative for automatic exchange of information on beneficial ownership launched by the UK, France, Germany, Italy and Spain. This will give our tax and other relevant authorities full knowledge on vast amounts of information and help them track the complex offshore trails used by criminals. The intention is that this will mirror the ground-breaking steps we have taken on tax evasion under the CRS. In this regard we also call on all jurisdictions to implement the CRS to the agreed timetable and for those not yet committed to do so rapidly.

Automatic exchange of beneficial ownership information will, as with the CRS, be subject to the usual data and confidentiality protections and to any appropriate exceptions. We will look to ensure that this information is in a fully searchable format and that it also contains information on entities and arrangements closed during the relevant year. To be effective this should be a global system and we call for the rapid establishment of a global standard.

We also call for the development of a system of interlinked registries containing full beneficial ownership information and for common international standards for these registries and their interlinking. We intend to start this project as soon as is practicable. In our view, this new initiative will take a significant step forward in improving the transparency of beneficial ownership information and in removing the veil of secrecy under which criminals operate.

A leak of searchable 11.5 million files, that’s 2.6 terabytes of data, from the embattled offshore services provider Mossack Fonseca. 2.6 terabytes of data, 11.5 million files, is a lot of files and scanned documents to comb through, so this leak is potentially, and probably, more significant than the 2014 ICIJ reported on leak or even the HSBC and UBS‘ leaks.

214,000 company details of 14,000 clients, including national political leaders of Western and Asian nations, business figures, and high net wealth families.

The leaked data covers nearly 40 years, from 1977 through the end of 2015. It allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues.

The law firm’s leaked internal files contain information on 214,488 offshore entities connected to people in more than 200 countries and territories. ICIJ will release the full list of companies and people linked to them in early May.

The data includes emails, financial spreadsheets, passports and corporate records revealing the secret owners of bank accounts and companies in 21 offshore jurisdictions, from Nevada to Singapore to the British Virgin Islands.

The ICIJ investigative reporters have been searching, extracting, then compiling lists of names and hidden dollars, reported on the ICIJ website here. When the list of 14,000 persons connecting them to hidden assets is published in May, expect a free for all

“When the complete list of 14,000 persons and each’s connections to offshore assets is published in early May by ICIJ, expect a free for all by the criminal investigative departments of the revenue authorities from the 200 countries uncovered in the files,” said Prof. William Byrnes of Texas A&M University’s School of Law. “This is the fifth major, game-changing, leak of offshore records, including Portcullis Trust (Singapore), HSBC, UBS, and LuxLeaks.”

“When all the leaked data is combined with all the thousands of taxpayer and offshore advisor files gleaned from offshore voluntary compliance and non-prosecution programs, then crunched with AI (artificial intelligence, or neural network) programs that “connects the dots”, many additional politicians and business leaders are going to be exposed to criminal and civil tax and corruption investigations.” continued William Byrnes. “I think many have been trying to run out the clock by suppressing this information. For some countries that strategy may work, but others countries will experience televised perp walks and political backlash.”

Professor William Byrnes added, “I expect to see investigations and prosecutions of attorneys and staff of Mossack Fonseca, and eventual extradition. Perhaps the firm will enter into nonprosecution agreements with governments, pay a fine, like the Swiss banks and several Big 4 accomplished, and turn over its remaining client files. It may be an end to the firm, but when its partners and staff are faced with a choice of either US and other countries long term prison sentences or providing evidence against clients, the clients are going to be ‘thrown under the bus’.”

Professor William Byrnes pivoted in the discussion, “The US has a highly successful international financial service industry that is important to the US economy, exemplified by, firstly, the international financial centres such as Miami and New York) of over a half trillion dollars of foreign deposits of high net wealth individuals whom many experts allege are not tax and exchange control compliant in their home countries; secondly, over 900,000 Delaware companies is the second to Hong Kong, and ahead of British Virgin Islands (BVI is actually third in the world);[1] and thirdly, the US territories’ offshore regimes, reducing the effective US corporate and income tax rates below 3.5 percent.[2]”

“In 2011, 133,297 businesses incorporated in Delaware. Delaware has more corporate entities than people — 945,326 to 897,934,” he continued. “These absentee corporate residents account for a quarter of Delaware’s total budget, roughly $860 million in taxes and fees in 2011.[3] Moreover, the economic spill-over impact for Delaware includes substantial employment and professional fees to Delaware business participating in the incorporation and advisory industry. Delaware is just behind China’s Hong Kong in number of annual incorporations and overall incorporations, and well ahead of the UK’s Virgin Islands (British) both in terms of offshore business and the dollars earned from that offshore business. Thus, I wonder how many of these Delaware companies, and Delaware corporate service providers, will be exposed once the data is disclosed by ICIJ in May?”